When you are setting up a portfolio of positions or placing an individual trade, it is important to know your individual risk tolerance. If you are starting to learn how to day trade, you might want to de-tune your strategies and only enter into trades that are of a lower risk nature. When you are just starting out it is important to have adequate time to develop positions and not to have too many fast moving, volatile, and risky trades open. This will give you more mental room to think about how each trade is reacting to the market’s news and other developments.

De-tuning your accounts and limiting the risk in your day trading sessions can be as easy as using less of your overall portfolio’s cash balance, day trading three uncorrelated asset classes, or even limiting your trading times to sessions when only long positions will be profitable.

Keeping your trades simple and being more risk averse will make each of your day trading sessions move slower, with the overall effect of bringing more comfort and enjoyment to your day trading business.

Day trading with real money in fast moving markets is stressful and filled with pressure. If you can learn to ease these factors by limiting your risk, you are going a long way in keeping your day trading sessions positive experiences, and ones in which you can learn from and build on.

Don’t feel as though you have to be trading with high levels of margin, with unfamiliar sectors, or high dollar amounts. If you feel comfortable starting with minimal risk at the price of smaller returns, then this system is good for you. Once you get the gist of analyzing market news, studying the fundamentals, reading the charts, and day trading successfully, it is easy to search for higher returns by increasing your risk appetite.

Higher risk can be accepted into your portfolio when you are ready: you might start with higher dollar amount trades, multiple trades at the same time, or more complicated trading techniques.

Your Risk Tolerance

The key is to know your risk tolerance and stay within those boundaries. No one should force you to take on too much risk if it makes you feel uncomfortable. You might be 100 percent fine with day trading equities and ETFs. In fact, you might be so pleased with your returns for the amount of risk you are taking that you may never want to venture into the world of commodities, futures, or FX. Don’t start to think that you are not a real day trader just because you have de-tuned your risk level to the point that you are enjoying your business, making money, and generally pleased with your results. Just because others seem to be suffering with their day trading efforts doesn’t mean that they are more of a day trader than you. It may, in fact, be that the others who are having problems are expecting too much out of day trading; they may be trying complicated prepackaged commercial systems, or are trying to squeeze too much profit out of too small an account. Day trading should enhance your life, give you enjoyment, intellectual stimulation, and profit. It should not turn your world into a complicated mess of struggling with placing trades and then worrying about the potential effect on your account (and mental well-being!).

Keep it small and simple, and then if you would like, build up into a more risk-oriented structure in your account.